FIRST DIVISION

PAUL LEE TAN, ANDREW G.R. No. 153468

LIUSON, ESTHER WONG,
STEPHEN CO, JAMES TAN, Present:
JUDITH TAN, ERNESTO
TANCHI JR., EDWIN NGO, PANGANIBAN, CJ.,Chairperson,
VIRGINIA KHOO, SABINO YNARES-SANTIAGO,
PADILLA JR., EDUARDO P. AUSTRIA-MARTINEZ,
LIZARES and GRACE CALLEJO, SR., and
CHRISTIAN HIGH SCHOOL, CHICO-NAZARIO, JJ.
Petitioners,
- versus PAUL SYCIP and MERRITTO
LIM, Promulgated:
Respondents. August 17, 2006

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DECISION
PANGANIBAN, CJ.:

For stock corporations, the quorum referred to in Section 52 of the

Corporation

Code

is

based

on

the

number

of outstanding

voting stocks. For nonstock corporations, only those who are actual,
living members with voting rights shall be counted in determining the
existence of a quorum during members meetings. Dead members shall not
be counted.

The Case
The present Petition for Review on Certiorari [1] under Rule 45 of
the Rules of Court seeks the reversal of the January 23 [2] and May 7,
2002,[3] Resolutions of the Court of Appeals (CA) in CA-GR SP No.
68202.The first assailed Resolution dismissed the appeal filed by
petitioners with the CA. Allegedly, without the proper authorization of
the other petitioners, the Verification and Certification of Non-Forum
Shopping were signed by only one of them -- Atty. Sabino Padilla
Jr. The second Resolution denied reconsideration.
The Facts

Petitioner Grace Christian High School (GCHS) is a nonstock, nonprofit educational corporation with fifteen (15) regular members, who
also constitute the board of trustees.[4] During the annual members
meeting held on April 6, 1998, there were only eleven (11)
[5]

living member-trustees, as four (4) had already died. Out of the

eleven, seven (7)[6] attended the meeting through their respective

proxies. The meeting was convened and chaired by Atty. Sabino Padilla
Jr. over the objection of Atty. Antonio C. Pacis, who argued that there
was no quorum.[7] In the meeting, Petitioners Ernesto Tanchi, Edwin
Ngo, Virginia Khoo, and Judith Tan were voted to replace the four
deceased member-trustees.

When the controversy reached the Securities and Exchange Commission

(SEC), petitioners maintained that the deceased member-trustees should
not be counted in the computation of the quorum because, upon their
death, members automatically lost all their rights (including the right to
vote) and interests in the corporation.
SEC Hearing Officer Malthie G. Militar declared the April 6,
1998 meeting null and void for lack of quorum. She held that the basis
for determining the quorum in a meeting of members should be their
number as specified in the articles of incorporation, not simply the
number of living members.[8] She explained that the qualifying phrase
entitled to vote in Section 24[9] of the Corporation Code, which provided
the basis for determining a quorum for the election of directors or
trustees, should be read together with Section 89.[10]
The hearing officer also opined that Article III (2) [11] of the ByLaws of GCHS, insofar as it prescribed the mode of filling vacancies in
the board of trustees, must be interpreted in conjunction with Section
29[12]of the Corporation Code. The SEC en banc denied the appeal of
petitioners and affirmed the Decision of the hearing officer in toto. [13] It
found to be untenable their contention that the word members, as used in
Section

52[14] of

the

Corporation

Code,

referred

only

to

the living members of a nonstock corporation.[15]

As earlier stated, the CA dismissed the appeal of petitioners,
because the Verification and Certification of Non-Forum Shopping had

been signed only by Atty. Sabino Padilla Jr. No Special Power of

Attorney had been attached to show his authority to sign for the rest of
the petitioners.
Hence, this Petition.[16]
Issues
Petitioners state the issues as follows:
Petitioners principally pray for the resolution of the legal question of
whether or not in NON-STOCK corporations, dead members should still be
counted in determination of quorum for purposed of conducting the Annual
Members Meeting.
Petitioners have maintained before the courts below that the DEAD
members should no longer be counted in computing quorum primarily on
the ground that members rights are personal and non-transferable as
provided in Sections 90 and 91 of the Corporation Code of the Philippines.
The SEC ruled against the petitioners solely on the basis of a 1989 SEC
Opinion that did not even involve a non-stock corporation as petitioner
GCHS.
The Honorable Court of Appeals on the other hand simply refused to
resolve this question and instead dismissed the petition for review on a
technicality the failure to timely submit an SPA from the petitioners
authorizing their co-petitioner Padilla, their counsel and also a
petitioner before the Court of Appeals, to sign the petition on behalf of the
rest of the petitioners.
Petitioners humbly submit that the action of both the SEC and the Court of
Appeals are not in accord with law particularly the pronouncements of this
Honorable Court in Escorpizo v. University of Baguio (306 SCRA
497), Robern Development Corporation v. Quitain (315 SCRA 150,)
and MC Engineering, Inc. v. NLRC, (360 SCRA 183). Due course should

have been given the petition below and the merits of the case decided in
petitioners favor.[17]

In sum, the issues may be stated simply in this wise: 1) whether the CA
erred in denying the Petition below, on the basis of a defective
Verification and Certification; and 2) whether dead members should still
be counted in the determination of the quorum, for purposes of
conducting the annual members meeting.
The Courts Ruling
The present Petition is partly meritorious.
Procedural Issue:
Verification and Certification
of Non-Forum Shopping

The Petition before the CA was initially flawed, because the

Verification and Certification of Non-Forum Shopping were signed by
only one, not by all, of the petitioners; further, it failed to show proof
that the signatory was authorized to sign on behalf of all of
them. Subsequently, however, petitioners submitted a Special Power of
Attorney, attesting that Atty. Padilla was authorized to file the action on
their behalf.[18]

In the interest of substantial justice, this initial procedural lapse

may be excused. [19] There appears to be no intention to circumvent the
need for proper verification and certification, which are aimed at
assuring the truthfulness and correctness of the allegations in the Petition
for Review and at discouraging forum shopping.[20] More important, the
substantial merits of petitioners case and the purely legal question
involved in the Petition should be considered special circumstances [21] or
compelling reasons that justify an exception to the strict requirements of
the verification and the certification of non-forum shopping.[22]
Main Issue:
Basis for Quorum

Generally, stockholders or members meetings are called for the purpose

of electing directors or trustees[23] and transacting some other business
calling for or requiring the action or consent of the shareholders or
members,[24] such as the amendment of the articles of incorporation and
bylaws, sale or disposition of all or substantially all corporate assets,
consolidation and merger and the like, or any other business that may
properly come before the meeting.
Under the Corporation Code, stockholders or members periodically elect
the board of directors or trustees, who are charged with the management
of the corporation.[25] The board, in turn, periodically elects officers to

carry out management functions on a day-to-day basis. As owners,

though, the stockholders or members have residual powers over
fundamental and major corporate changes.
While stockholders and members (in some instances) are entitled to
receive profits, the management and direction of the corporation are
lodged with their representatives and agents -- the board of directors or
trustees.[26]In other words, acts of management pertain to the board; and
those of ownership, to the stockholders or members. In the latter case,
the board cannot act alone, but must seek approval of the stockholders or
members.[27]

Conformably with the foregoing principles, one of the most important

rights of a qualified shareholder or member is the right to vote -- either
personally or by proxy -- for the directors or trustees who are to manage
the corporate affairs.[28] The right to choose the persons who will direct,
manage and operate the corporation is significant, because it is the main
way in which a stockholder can have a voice in the management of
corporate affairs, or in which a member in a nonstock corporation can
have a say on how the purposes and goals of the corporation may be
achieved.[29] Once the directors or trustees are elected, the stockholders
or members relinquish corporate powers to the board in accordance with
law.

In the absence of an express charter or statutory provision to the

contrary, the general rule is that every member of a nonstock
corporation, and every legal owner of shares in a stock corporation, has
a right to be present and to vote in all corporate meetings. Conversely,
those who are not stockholders or members have no right to vote.
[30]

Voting may be expressed personally, or through proxies who vote in

their representative capacities.[31] Generally, the right to be present and to

vote in a meeting is determined by the time in which the meeting is held.
[32]

Section 52 of the Corporation Code states:

Section 52. Quorum in Meetings. Unless otherwise provided for in this
Code or in the by-laws, a quorum shall consist of the stockholders
representing a majority of the outstanding capital stock or a majority of the
members in the case of non-stock corporations.

In stock corporations, the presence of a quorum is ascertained and

counted on the basis of the outstanding capital stock, as defined by the
Code thus:
SECTION 137. Outstanding capital stock defined. The term outstanding capital
stock as used in this Code, means the total shares of stock issued under
binding subscription agreements to subscribers or stockholders, whether or
not fully or partially paid, except treasury shares. (Underscoring supplied)

The Right to Vote in

Stock Corporations
The right to vote is inherent in and incidental to the ownership of
corporate stocks.[33] It is settled that unissued stocks may not be voted or
considered in determining whether a quorum is present in a stockholders
meeting, or whether a requisite proportion of the stock of the corporation
is voted to adopt a certain measure or act. Only stock actually issued and

outstanding may be voted.[34] Under Section 6 of the Corporation Code,

each share of stock is entitled to vote, unless otherwise provided in the
articles of incorporation or declared delinquent[35] under Section 67 of
the Code.

Neither the stockholders nor the corporation can vote or represent shares
that have never passed to the ownership of stockholders; or, having so
passed, have again been purchased by the corporation. [36] These shares
are not to be taken into consideration in determining majorities. When
the law speaks of a given proportion of the stock, it must be construed to
mean the shares that have passed from the corporation, and that may be
voted.[37]

Section 6 of the Corporation Code, in part, provides:

Section 6. Classification of shares. The shares of stock of stock corporations may
be divided into classes or series of shares, or both, any of which classes or
series of shares may have such rights, privileges or restrictions as may be
stated in the articles of incorporation: Provided, That no share may be
deprived of voting rights except those classified and issued as preferred or
redeemable shares, unless otherwise provided in this Code: Provided,
further, that there shall always be a class or series of shares which have
complete voting rights.
xxxxxxxxx
Where the articles of incorporation provide for non-voting shares in the cases
allowed by this Code, the holders of such shares shall nevertheless be
entitled to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of
all or substantially all of the corporation property;